Citi was seeking $60 billion of damages from Wells Fargo

Discussion in 'Economics' started by asap, Oct 5, 2008.

  1. asap

    asap

    ---------------------------------------
    citi tries to defend its honor. will they get anything other than delaying wells fargo bid? i dont think so. wfc deal is more solid, it doesnt involve the fdic and is obviously prefered better for wb shareholders. on top of this, citi is sunken in a abyss of toxic assets that no one is able to quantify yet.
    ----------------------------------------

    http://www.marketwatch.com/News/Story/Story.aspx?guid={BBF7C480-E2A2-4047-9781-A7342C799364}



    NEW YORK (MarketWatch) - Citigroup said late on Saturday that a New York court issued an order extending its agreement under which it has exclusive rights to negotiate a purchase of Wachovia Corp.
    A deal between Wachovia and Citi was unveiled on Monday. But late on Thursday, Wachovia agreed to be acquired by Wells Fargo.
    Responding on Friday to the Wachovia-Wells tie-up proposal, Citigroup claimed that it had exclusive rights and that Wachovia was not permitted to talk to anyone else.
    A statement on Saturday from Citi said that Justice Charles Ramos of New York State Supreme Court, a trial court, issued an emergency injunction that extended Citi's exclusivity agreement with Wachovia. The judge issued the order over Wachovia's objection, Citi said.
    The exclusivity agreement, Citi's Saturday statement said, "unconditionally bars Wachovia from negotiating or entering into a merger/acquisition agreement with any party other than Citi."
    Justice Ramos set a hearing for Friday, Oct. 10, at which Citigroup and Wachovia must appear, Citi said.
    Citi (C:
    Citigroup, Inc
    News, chart, profile, more
    Last: 18.35-4.15-18.44%
    4:02pm 10/03/2008
    Delayed quote data
    Add to portfolio
    Analyst
    Create alert
    Insider
    Discuss
    Financials
    Sponsored by:
    C 18.35, -4.15, -18.4%) said on Friday and reiterated Saturday that it had been providing liquidity support to Wachovia Bank last week, since the two banks had agreed on a deal.
    Citi said Friday that it had nearly completed the definitive agreements required to complete the deal. It demanded that Wachovia, (WB:
    Wachovia Corp
    News, chart, profile, more
    Last: 6.21+2.30+58.82%
    4:07pm 10/03/2008
    Delayed quote data
    Add to portfolio
    Analyst
    Create alert
    Insider
    Discuss
    Financials
    Sponsored by:
    WB 6.21, +2.30, +58.8%) Charlotte, N.C., and Wells Fargo, San Francisco, (WFC:
    Wells Fargo & Company
    News, chart, profile, more
    Last: 34.56-0.60-1.71%
    4:01pm 10/03/2008
    Delayed quote data
    Add to portfolio
    Analyst
    Create alert
    Insider
    Discuss
    Financials
    Sponsored by:
    WFC 34.56, -0.60, -1.7%) terminate their agreement. "Citi has substantial legal rights regarding Wachovia and this transaction," it said on Friday.
    Wells Fargo's "conduct constitutes tortious interference" with the exclusivity agreement, Citi said on Friday.
    The New York Times, citing a person briefed on the situation, reported on Saturday that Citi was seeking $60 billion of damages from Wells Fargo for interfering with the transaction.
    In the statement Saturday, Citi said that it is "prepared to resume negotiating in good faith to complete the transaction contemplated by the agreement in principle" that it and Wachovia announced on Monday.
    That deal would have seen Citi buy Wachovia's banking operations. Citi would have received Federal Deposit Insurance Corp. protection against losses on $312 billion of Wachovia's more troubled assets. Wachovia is one of the largest holders of option adjustable-rate mortgages. See full story
    Shortly after it issued its Friday statement, Citi released the Exclusivity Agreement. Read the Agreement
    In a conference call Friday morning, Robert Steel, chief executive officer at Wachovia, addressed claims about a binding agreement with Citigroup by saying, "The controversy on this issue will be addressed in the appropriate way." He declined further comment.
    One lawyer said on Friday that while the agreement shows that Citi has a case, it's unlikely that it would be able to persuade a court to overturn the Wells-Wachovia deal.
    "If Citi goes to court, how could they show lost profits in this market and with all those toxic assets [involved in the deal]?" asked Roger Cominsky, partner at law firm Hiscock & Barclay. "Talk about a pyrrhic victory. The court could say, 'Yes the agreement was violated, but your deal is dead and you don't have any lost profits.'"
    Citi said when the deal was announced that it could have been exposed to potential losses of $42 billion as a result of the acquisition.
    In a move that reflects how Citi was blindsided by the Wells-Wachovia deal, Citi placed a full-page ad touting its deal with Wachovia in newspapers across the country on Friday, including USA Today. (GCI:
    Gannett Co., Inc
    News, chart, profile, more
    Last: 15.18-1.10-6.76%
    4:03pm 10/03/2008
    Delayed quote data
    Add to portfolio
    Analyst
    Create alert
    Insider
    Discuss
    Financials
    Sponsored by:
    GCI 15.18, -1.10, -6.8%)
    "Citibank is honored to enter into a partnership with Wachovia," said the ad. "Together we will be part of the largest financial-services company in the world."
    Citi's acquisition would have seen it pay $2.16 billion in stock to Wachovia, plus the $12 billion in preferred securities and warrants it gave to the FDIC. In return, Citi would have received $448 billion of bank deposits -- a large source of stable funding.
    At the time, Citigroup CEO Vikram Pandit said the acquisition offered a rare combination of potentially high returns and low risk.
    But that deal was trumped, with Wachovia agreeing late Thursday to a deal in which it would be folded into Wells Fargo. The new deal will not require any FDIC support, Wachovia said.
    A source familiar with the situation said the Citigroup deal did not include a breakup fee, which would have made it more costly for Wachovia to break off discussions on a deal with Citi. See full story
    On Friday Citi shares fell $4.15, or more than 18%, to $18.35. Wachovia shares leaped $2.30, or 59%, to $6.21.
    And Wells Fargo shares slipped 60 cents, or 1.7%, to $34.56. End of Story
     
  2. Daal

    Daal

    LOL, they want to bankrupt one of the few healthy banks and piggy back on the taxpayer at the same time?guess they will get a call from paulson soon
     
  3. C 18.35, -4.15, -18.4%) said on Friday and reiterated Saturday that it had been providing liquidity support to Wachovia Bank last week, since the two banks had agreed on a deal.

    I think this might have be worth some damages. Who knows if the bank would even still be here today if Citi hadn't offered to help them out. Wells Fargo is the one who walked away from Wachovia when they got scared of their loan portfolios.
     
  4. asap

    asap

    that looks like smoke and mirrors. we all know citi is struggling to get liquidity for their own ops, so how come all of the sudden they're able to become a lender of last resort to wb?

    in my opinion, citi might setting the stage for offering itself to be acquired, maybe by wfc as well. the lawsuit might provide them some leverage in the negotiation...

    the fed should push for this as well as citi is very weak and the risks of a major implosion are high and its consequences unpredictable.
     
  5. Vikram Pandit is using the Samson defense and wants to bring down the walls of the entire banking sector to defend his posterity.
     
  6. Is Citi a buy at this price?
     
  7. Mr Rogers says Citi is a buy at $5.
     
  8. I heard that government may step in Citibank, as it is too big to fail. Common share holders would get hurt. I have quite a lot of Citi for the long term investment. What are your opinions? If I sell now, I will lose. However, it is better to lose small than big.